OCEAN FREIGHT RATES

* Contributed by the International Grains Council (http://www.igc.org.uk )

Ocean freight market (November 2006 – May 2007)

Dry bulk freight rates surged to record highs in recent months due to continuing strong mineral demand in China and increased grain and soyabean shipments. The Capesize sector led the market on heavy demand and tight supply of tonnage caused by port congestion and weather delays. The Panamax sector benefited from the splitting of larger shiploads into Panamax-sized parcels. Some of the ships on longer timecharters were being re-let at a sizeable premium. Short and longer period charters continued to dominate. For grains, major support in the Atlantic came from business from South America, following larger than expected maize and soyabeans crops. The Baltic Dry Index (BDI) set a new record of 6688 points on 15 May, but retreated slightly thereafter, to close at 6471 on 22 May, an increase of 62 percent over the past six months. During the same period, the newly introduced IGC Grain Freight Index (GFI)^1/, which does not include Capesize vessels, rose by 38 percent, to 7 568.

In the Panamax sector, Pacific rates were boosted by large volumes of iron ore and coal shipments to China. Voyage rates from the east coast of India were particularly strong, with a recent fixture to China reported at US$ 59 000 daily. Congestion in Australia’s Newcastle port, the world’s largest coal terminal, continued to tie up tonnage. Short period activity ranged between US$ 40 000 and US$ 42 500 daily. With regard to longer-term period charters, a two-year contract was recently concluded at US$ 30 500 daily. Atlantic rates remained stronger than in the Pacific due to solid demand for South American grains and soyabeans, and tight supply of ships in early positions, with transatlantic rates increasing to US$ 50 000 - US$ 52 000 daily compared with US$ 28 000 last October. The grain rate from the US Gulf to Japan surged by US$16.00 over the period, to US$ 64.00/tonne. A one-year charter was recently fixed at US$ 41 000/day.

Capesize rates strengthened further on heavy mineral demand, limited new building deliveries and port congestion in Australia, Brazil and China. China’s imports of iron ore, with volumes rising by about 23 percent in the first quarter of 2007, remained the dominant market factor. By mid-May, increased chartering enquiries in the Atlantic lifted roundtrips to about US$ 110 000 daily. The benchmark iron ore rate from Brazil to China was recently traded at about US$ 51.00/tonne. Pacific roundtrips increased from US$ 70 000 to US$ 96 500 daily, on improved demand by China.

In the Handysize sector, good demand for South American grains, soyabeans and sugar, as well as a shortage of vessels in prompt positions, pushed Atlantic voyage rates higher, with a recent grain fixture from Argentina (River Plate) to Morocco reported at US$ 73.50/tonne. Since October 2006, the grain rate from Brazil to the EU (Antwerp-Hamburg) increased by 50 percent, to US$ 69.00/tonne. Strong demand for tonnage in the Mediterranean and in the Black Sea continued to push rates higher. Handymax rates in the Pacific basin also advanced, especially in the Indian Ocean, with a voyage rate from the east coast of India to China recently reported at US$ 40 000 daily. Pacific roundtrips were quoted at about US$ 36 500 daily in May.

1.  The GFI distinguishes grain routes from mineral and other dry bulk routes also included in more general dry bulk indices such as the Baltic Dry Index (BDI). The new GFI is composed of 15 major grain routes, representing the main grain trade flows, with five rates from the United States, and two each from Argentina, Australia, Canada, the European Union and the Black Sea. Vessel sizes are adequately represented, with ten Panamax rates and five in the Handysize sector. The GFI will be calculated weekly, with the average for the four weeks to 18 May 2005 taken as its base of 6000.